Add Foreign Exposure With A Single Country ETF

| July 28, 2008 | 0 Comments

As an Investment Banker I learned quickly that vacations are a gift, not a right.  Because I was providing a service to my clients, their needs came first.  Every banker knows it and has had to cancel a trip or two.  I still remember the sting of having to give up my tickets for a 10 day Hawaiian vacation – a client needed help on a high profile merger.

After going through experiences like that I appreciate all the more the vacations I do get to take.

More than 33% of Americans intend to take a vacation at some point this summer.  Some have been planning it for months; others take off on a whim.  Anyone with a job tied to the stock market knows the best time to take a vacation is in August . . . specifically the last two weeks of August.

Why Then?

For some reason, most fund managers and institutional investors are willing to part with their trading terminals at the end of August.  It means the smart money is working harder on their tan than the next great stock pick.  I know it seems strange but it’s really true.  Trading volumes on all of the markets shrink.  The amount of research from the investment banks is reduced.  And it seems even financial news slows at that time of the year.

A summer vacation is a great opportunity to disconnect from the markets.

It’s a chance to step back and reflect.  It’s a chance to expand your research horizons and explore new places.  It’s an opportunity to see things you normally wouldn’t see.  The biggest benefit . . . you might find an interesting investment idea along the way.

Let me give you an example.

Everyone knows there are four big developing countries in the world: China, India, Brazil, and Russia.  A summer vacation is a perfect opportunity to see these countries first hand.  It puts investing in China in a different perspective.  A unique perspective when you’ve seen the growth and the thousands of new construction sites in their largest cities.

If you’re really adventurous, you can also explore other lesser known countries.  Some of these might even prove to be your best investments yet.

Take a quick look at Thailand.  Last year more than 15 million tourists visited the country.

All of them witnessed the same thing.  Thailand’s growing economy.  This economy is expected to grow a robust 5% to 6% in 2008.  Compare this to the paltry less than 1% growth rate of the US and you can see why investors get excited.  The country is developing their infrastructure and the government has started enacting a series of serious tax cuts to spur further growth.

Thailand’s stocks are trading at some of the lowest P/E ratios.  Their market is off its highs by more than 20% this year . . . and many people see this as a buying opportunity.

But there’s a risk or two.

Despite its high growth rate, the country still shows some instability in government.  In 2006 Thailand experienced a military coup.  The Prime Minister Thaksin Shinawatra was overthrown for alleged corruption and, get this, disrespect to the Monarchy.

In December 2007 the military restored democracy and held elections. The removed prime minister won in a hotly contested election that many feel was rigged.

Despite his win, he is still on trial for corruption charges.  This government uncertainty has weighed on market valuations.  But every dark cloud has a silver lining.

These risks have scared away a number of investors.  Investors who will return over time buying back into the market they so quickly exited.  If you have an iron stomach, take a look at Thailand.  Better yet . . . use your summer vacation to go explore the country.  You might find an investment opportunity that turns your summer vacation into a real money maker.

Investing the easy way.

Don’t have two weeks or the extra cash to spring on an international trip?  Do a bit of research on the country.  Then look at the IShares MSCI Thailand Investable Market Index Fund (THD).  It’s a new fund that was just introduced.  It holds 73 of the top companies operating in Thailand.  A company’s inclusion is based on a number of factors including market value and available float.  With an expense ratio of 0.68% it’s an inexpensive way to capture the growth opportunity in Thailand.

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Category: Foreign Markets

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The Dynamic Wealth Report works with a number of staff writers and guest experts who specialize in everything from penny stocks to ETFs to options trading. These guest analysts post under the 'staff writer' moniker for ease of use.

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